Canadian Utilities has announced:
it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets, and including TD Securities Inc., Scotiabank, CIBC, Canaccord Genuity Corp., and GMP Securities L.P. The underwriters have agreed to buy 5,000,000 5.25% Cumulative Redeemable Second Preferred Shares Series EE at a price of $25.00 per share for aggregate gross proceeds of $125,000,000. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.
Canadian Utilities Limited has granted the underwriters an option to purchase at the offering price an additional 2,000,000 Series EE Preferred Shares exercisable in whole or in part at any time up to 7:00 AM (Calgary time) on the date that is two business days prior to closing. Should the option be fully exercised, the total gross proceeds of the Series EE Preferred Share offering will be $175,000,000.
The Series EE Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable quarterly as and when declared by the Board of Directors of the Corporation at an annual rate of $1.3125 per share, to yield 5.25% annually. On or after September 1, 2020, the Corporation may redeem the Series EE Preferred Shares in whole or in part from time to time, at $26.00 per share if redeemed during the 12 months commencing September 1, 2020, at $25.75 per share if redeemed during the 12 months commencing September 1, 2021, at $25.50 per share if redeemed during the 12 months commencing September 1, 2022, at $25.25 per share if redeemed during the 12 months commencing September 1, 2023, and at $25.00 per share if redeemed on or after September 1, 2024.
The offering is being made only in the provinces of Canada by means of a prospectus supplement and the closing date of the issue is expected to be on or about August 7, 2015.
Implied Volatility theory suggests that this issue is somewhat expensive – the company has, as is often the case, priced the issue so that it yields the same as issues trading at a discount, thus assigning a value of zero to the ill effects of negative convexity.